As the quantity of labor increases, which of the following is the most likely outcome
with respect to the marginal revenue product (MRP) of labor?
A. MRP increases for a monopoly.
B. MRP decreases for a firm in perfect competition.
C. MRP increases for both monopoly and a firm in perfect competition.
Answer: B
“Markets for Factors of Production”, Michael Parkin
2009 Modular Level I, Volume 2, pp. 255-257
Study Session 5-21-a
Explain why demand for the factors of production is called derived demand,
differentiate between marginal revenue and marginal revenue product (MRP), and
describe how the MRP determines the demand for labor and the wage rate.
MRP decreases for a firm in perfect competition, due to a decline in marginal
product.
